FedEx gets little actual cash in city, county incentives

Taylor Williams checks packages as they go by on a belt at the new FedEx Ground hub in Kernersville, N.C., in Oct. 12, 2011 file photo The Kernersville facility is similar to the one proposed for Ocala. (Jennifer Rotenizer/Winston-Salem Journal)

Published: Wednesday, February 6, 2013 at 4:58 p.m.

Last Modified: Wednesday, February 6, 2013 at 4:58 p.m.

If FedEx Ground delivers on its proposal to build a 383,161-square-foot package distribution hub on 150 acres in northwest Ocala, the city of Ocala expects to recoup the $2.39 million in incentives it pledged to the company in four years' time.

The city has calculated that, over four years, it will collect $1.96 million in ad valorem taxes for the building, machinery and equipment and $998,807 in utility tax and electric revenue.

"We looked at real property tax on the building. For commercial property, they not only pay for the building and land but also on machinery and equipment in the building," said Marc Mondell, the city's executive director of community development.

The company has proposed a $122.9 million capital investment, including $75 million to construct the building and $39 million for the machinery and equipment.

"We tried to provide a conservative analysis," Mondell said. "It depends on what we know and don't know about the property."

Right now the land holds an agricultural exemption, with a very low valuation. Its value will increase as Northwest 35th Avenue is built. And it will increase, again, when the building is constructed.

"All those things can influence the value of the land," Mondell said.

Because it does not know what value the property appraiser will assign to the property, the city did not include an increase in the value of the land as part of the analysis.

"What that means is there's a good chance our return will be less than four years," Mondell said.

But what the city has pledged, while it all has value, cannot all be counted as cash outlay, since some of it involves waiving or crediting fees. The city has agreed to waive or give credit for $742,149 in development fees.

And some of the incentives the city offered will be in the form of reimbursements to the company for moving a gas line and an electric transmission line. Those costs — although cash in the amount of up to $400,000 for the gas line and $750,000 for the electric line — will be spread over 10 years. And $99,000 in matches to a state Qualified Target Industry grant will be spread over four years and offered only if the company meets its obligations.

If all goes as written in the agreement, and the company completes the building by the Oct. 31, 2016, deadline and hires the 165 full-time equivalent employees at an average annual wage of $31,536, the city's actual cash outlay is expected to be between $100,000 and $150,000 — the cost to move a water reuse line on the property.

"Not a bad deal," Mondell said.

The project, if it goes forward, will be built in the Ocala/Marion County Commerce Park east of Interstate 75 and north of U.S. 27 on the former Magna property, now owned by Bill Kearns' Ocala 489 LLC. Kearns and FedEx still have to come to terms and close on the land.

But while the city of Ocala and Marion County have each approved incentives for FedEx, the state still must approve its portion.

The state is considering awarding a $792,000 Qualified Target Industry grant, $744,959 in Enterprise Zone incentives and $200,000 in Workforce Quick Response Training awards. To receive state dollars, the company must apply for the funds and meet certain requirements.

Mondell said the city is hoping to maximize the Florida Department of Transportation road construction grant of $2.15 million.

Before FedEx Ground showed up on the city's doorstep, the city had agreed to build two lanes of Northwest 35th Avenue into the Commerce Park, a project that is currently under way. FedEx has asked that the road be four lanes, so the FDOT grant will be used to make the road improvements.

Like the city's incentive, the $1.08 million in incentives approved by the Marion County Commission include waivers of $579,723 in transportation impact fees, which the county has suspended for all projects anyway. It also has pledged $400,000 as its share of the cost to move the gas line, and $99,000 to match the state's Qualified Target Industry grant. Those will be reimbursed to the company over 10 years and four years respectively.

<p>If FedEx Ground delivers on its proposal to build a 383,161-square-foot package distribution hub on 150 acres in northwest Ocala, the city of Ocala expects to recoup the $2.39 million in incentives it pledged to the company in four years' time.</p><p>The city has calculated that, over four years, it will collect $1.96 million in ad valorem taxes for the building, machinery and equipment and $998,807 in utility tax and electric revenue.</p><p>"We looked at real property tax on the building. For commercial property, they not only pay for the building and land but also on machinery and equipment in the building," said Marc Mondell, the city's executive director of community development.</p><p>The company has proposed a $122.9 million capital investment, including $75 million to construct the building and $39 million for the machinery and equipment.</p><p>"We tried to provide a conservative analysis," Mondell said. "It depends on what we know and don't know about the property."</p><p>Right now the land holds an agricultural exemption, with a very low valuation. Its value will increase as Northwest 35th Avenue is built. And it will increase, again, when the building is constructed.</p><p>"All those things can influence the value of the land," Mondell said.</p><p>Because it does not know what value the property appraiser will assign to the property, the city did not include an increase in the value of the land as part of the analysis.</p><p>"What that means is there's a good chance our return will be less than four years," Mondell said.</p><p>But what the city has pledged, while it all has value, cannot all be counted as cash outlay, since some of it involves waiving or crediting fees. The city has agreed to waive or give credit for $742,149 in development fees.</p><p>And some of the incentives the city offered will be in the form of reimbursements to the company for moving a gas line and an electric transmission line. Those costs — although cash in the amount of up to $400,000 for the gas line and $750,000 for the electric line — will be spread over 10 years. And $99,000 in matches to a state Qualified Target Industry grant will be spread over four years and offered only if the company meets its obligations.</p><p>If all goes as written in the agreement, and the company completes the building by the Oct. 31, 2016, deadline and hires the 165 full-time equivalent employees at an average annual wage of $31,536, the city's actual cash outlay is expected to be between $100,000 and $150,000 — the cost to move a water reuse line on the property.</p><p>"Not a bad deal," Mondell said.</p><p>The project, if it goes forward, will be built in the Ocala/Marion County Commerce Park east of Interstate 75 and north of U.S. 27 on the former Magna property, now owned by Bill Kearns' Ocala 489 LLC. Kearns and FedEx still have to come to terms and close on the land.</p><p>But while the city of Ocala and Marion County have each approved incentives for FedEx, the state still must approve its portion.</p><p>The state is considering awarding a $792,000 Qualified Target Industry grant, $744,959 in Enterprise Zone incentives and $200,000 in Workforce Quick Response Training awards. To receive state dollars, the company must apply for the funds and meet certain requirements.</p><p>Mondell said the city is hoping to maximize the Florida Department of Transportation road construction grant of $2.15 million.</p><p>Before FedEx Ground showed up on the city's doorstep, the city had agreed to build two lanes of Northwest 35th Avenue into the Commerce Park, a project that is currently under way. FedEx has asked that the road be four lanes, so the FDOT grant will be used to make the road improvements.</p><p>Like the city's incentive, the $1.08 million in incentives approved by the Marion County Commission include waivers of $579,723 in transportation impact fees, which the county has suspended for all projects anyway. It also has pledged $400,000 as its share of the cost to move the gas line, and $99,000 to match the state's Qualified Target Industry grant. Those will be reimbursed to the company over 10 years and four years respectively.</p><p><i>Contact Susan Latham Carr at 867-4156 or susan.carr@sstarbanner.com.</i></p>